Occupy’s Banking Instincts

Occupy Wall Street is gone from Zuccotti Park and most public spaces, yet the protest movement that came to life last September is still alive, often working in small, focused groups. In May, I contacted Cathy O’Neil, who facilitates one of two OWS Alternative Banking groups that meet weekly in New York. “We just submitted an amicus brief to the S.E.C.-Citigroup ruling, in favor of Judge Rakoff’s decision,” O’Neil told me when I contacted her.
On the last Sunday in June, I attended the group’s regularly scheduled meeting in a classroom on the Columbia University campus. I had not seen Occupy at work since it was driven out of Zuccotti Park. Or almost driven out. Occupy continues to engage financial institutions and government officials in creative actions that push the limits imposed by authorities.

At a conference table in a university classroom, Occupy Wall Street has an altogether different character. No political theater, no “human mics” to relay what a speaker is saying to listeners on the edge of the group. Decisions don’t seem to require complete consensus. More on the meeting below, but before I arrived, I had concluded that this group has good instincts, which is evident in the fight Occupy picked with the S.E.C. and Citigroup. The Citigroup case was decided December 2011, yet continues to be reported by journalists who recognize its potential to compel regulators to take fraudulent traders to court.

The back story involves a workaday transaction in a world where investment bankers batten on unwary investors. Last December, Federal District Judge Jed Rakoff sided with the investors, rejecting a consent decree between the S.E.C. and Citigroup. Rakoff objected to what Citi got away with. As he described it, when the managers at Citigroup Global Markets discovered that the value of some of their mortgage-backed securities was tanking, they moved them into a $1 billion investment fund that “allowed [them] to dump some dubious assets on misinformed investors.”

Citigroup took a short position on securities, sold them to investors, and made $700 million. The investors lost $160 million.

The S.E.C. agreed to a settlement in which Citigroup admitted “negligence,” neither denied nor admitted the allegations, paid $265 million in disgorgement and fines, and promised to comply with the law in future transactions. In rejecting the settlement, Rakoff called it “a very good deal for Citigroup” and a “quick headline” for the S.E.C. Citi appealed. And OWS jumped in. In a 27-page amicus brief written by an attorney in New Jersey, Occupy Wall Street is supporting Judge Rakoff. The S.E.C. is backing Citigroup in the appeal, as is the big corporate lobby.

The Occupy bank group is an eclectic mix. O’Neil is a former Wall Street quant who did data analysis for D.E. Shaw. Yves Smith edits the Naked Capitalism blog and is the founding member of a consulting firm that works with financial institutions. A man who introduced himself by his first name, Tom, is an attorney and financial analyst.

There were a half-dozen undergraduate and graduate students, a retired teacher, and an age range that descended from the mid-seventies to the mid-twenties. They have already had a good run that includes a position paper submitted to the S.E.C. regarding the implementation of the “Volcker Rule”; a meeting with Paul Volcker; ongoing discussions with S.E.C. rule writers; the Citigroup filing; the occasional protest.

On the last Sunday in June, the group discussed the status of various projects: Evil Financiers Playing Cards; fliers to distribute at marches and protests; speakers and topics for summer programs at the New York Public Library; a program to help individuals move their money from banks to credit unions. The discussion was lively if at times belabored, yet one topic captured the imagination of everyone in the room — another court case that demonstrates the systemic rot in the financial markets.

Smith had taped a segment on Bill Moyers Journal with Rolling Stone’s Matt Taibbi in which they discussed a trial in which three bond brokers from GE Finance were convicted in a bid-rigging scheme that stole billions from cities, hospitals, counties, and schools. No one from the banks who benefited from the scheme — UBS, Bank of America, Chase, Wells Fargo, Goldman, Transamerica — had been charged. Smith said a proper prosecution would have turned the “little guys” into witnesses against the big players who benefited most from the plundering of the public institutions, and the group quickly agreed to respond.

A student volunteered to draft rhetorical points to use when speaking to the public. One member of the group, probably Smith, will address the topic at the New York Public Library speakers series if the program develops, and at other public events. Another will consult attorneys regarding criminal causes of action that might remain after the conviction of the three lower-level employees. There was even a decision to approach a prosecutor known to one group member, who might be persuaded to take a second look at a municipal bond case. I was asked not to print the names of the lawyers and prosecutors who were discussed. As abruptly as they had convened, the Alternative Banking Group adjourned, on schedule, and walked out into a warm afternoon in Morningside Heights — 140 blocks north of and a six long months away from Zuccotti Park.